August 5, 2022
Source: Wall Street Journal
Photo / Image Source: Unsplash,
Europe is stepping up its coal consumption as it tries to reduce reliance on Russian energy.
WSJ’s Juan Forero and Phred Dvorak explain why Europe needs coal so badly, and what the consequences will be for the continent’s transition to cleaner energy.
FULL TRANSCRIPT This transcript was prepared by a transcription service. This version may not be in its final form and may be updated.
Ryan Knutson: The energy situation in Europe right now is a mess. European leaders have been trying to punish Russia for its war in Ukraine by taking aim at Russian energy. The European Union has banned Russian oil and is trying to cut back on Russian gas. In response, Russia has hit back. Here's our colleague, Juan Forero.
Juan Forero: Russia's holding back on natural gas as punishment in this struggle with Western Europe over the aid that Western Europe is providing to Ukraine.
Ryan Knutson: And now, Europe is about to take it a step further. Next week, it's implementing a ban on Russian coal. And Juan says the situation is thrown Europe into a full blown energy crisis.
Juan Forero: Europe has been highly dependent on Russia for its energy needs. And now with the war in Ukraine, of course, we're having serious problems in terms of Europe getting the energy that it needs.
Speaker 3: A scorching heat wave currently tormenting Europe and the UK is pushing power systems to the edge and testing energy policies.
Speaker 4: It's the rising cost of heating homes and feeding families that's worrying many Europeans.
Speaker 5: Europe is already bracing for what could be a long, cold winter because of Russia's war on Ukraine.
Ryan Knutson: Europe can't just cut down on Russian energy though. It has to replace it with something else. And a lot of people were hoping that that replacement would come from green energy sources like wind and solar, but that's not what's happening right now.
Juan Forero: The fact is that renewables are not providing the energy that we need.
Ryan Knutson: So an energy source that Europe is turning to is one that the continent had actually been trying to wean itself off of. Coal.
Juan Forero: And these countries are right now, forced to depend on coal more than before. And of course, this is the dirtiest fossil fuel. So this is bad news in the fight against climate change.
Ryan Knutson: Welcome to The Journal, our show about money, business, and power. I'm Ryan Knutson. It's Friday, August 5th. Coming up on the show, the resurrection of coal in Europe, and what it means for climate change. Why is it that coal is the fuel that Europe is turning to right now to fill its energy shortages?
Juan Forero: Well, I think Europe is turning to whatever energy sources it can get its hands on. Germany has just announced that it could go back on its decision to close down three nuclear power plants. And Europe is also working with the United States to get as much natural gas from the US, which is a monster producer of natural gas, to try to replace Russia. But that's not going to happen overnight.
Ryan Knutson: But there's one thing Europe can do practically overnight. It can import more coal.
Juan Forero: Getting coal from around the world is easier. It's not easy. It's problematic. There's obstacles, there's logistical problems. There's all kinds of hurdles, but it is easier. And so Europe is calling upon countries to provide more coal.
Ryan Knutson: Coal producing countries all over the world are answering that call. Coal exports from places like Australia, Indonesia, and South Africa are skyrocketing. So are exports from Colombia, where Juan is based.
Juan Forero: Well, Colombia is a big coal exporter. And in Colombia, coal is produced here by foreign companies that focus solely on producing large amounts of coal for export. Those companies are doing great.
Ryan Knutson: Demand for coal is so high right now that prices have tripled from $134 per metric ton at the start of the year, to over $400 a ton now. And Juan says that in Colombia, it's been a huge boom, even for small companies.
Juan Forero: These small mom-and-pop outfits, which might be kind of funny to an American to think that there would be tiny coal companies. We're talking about coal companies with ...
Ryan Knutson: Like a mom-and-pop coal shop?
Juan Forero: Yeah. Mom-and-pop coal shop. I mean, there's a gentleman named Gustavo Nunez, Gustavo is a gregarious guy. And he has, for many years been a mine owner. And he has these two little mines there in this town, just on the outskirts of Topaga. It only has a few thousand people, and much of its economy revolves around these mines, around the ups and downs of these mines. The boom times and the bad times, and so forth.
Ryan Knutson: For the last few years, as global demand for cold declined, it's been mostly bad times for Gustavo's coal mines. In fact, one of Gustavo's mines called El Diamante, closed in 2019.
Juan Forero: It was doing nothing. It was collecting coal dust, I suppose. I mean, this mine was not an operation. It had been mined in the past, but then with the low price of coal, during the pandemic and so forth, it was just shut down.
Ryan Knutson: But now, after all this coal demand started coming from Europe, Gustavo decided to get the El Diamante mine back up and running.
Juan Forero: So the El Diamante mine is ... this is what you would picture if you thought about mining in the early 20th century. They have a coal car that goes through there. They have a little rail line, and it's a mine that goes about 60 meters deep, some 200 feet. So you got these guys down there with pickaxes and so forth, just going at the walls of this mine, trying to get at this coal. Which is shipped up to the top, via this car.
Ryan Knutson: As a result of the coal boom, Gustavo's miners are earning a lot more money than they normally would.
Juan Forero: The miners who work in Gustavo's mine, and the miners who work in many of the other small family-owned, family-operated mom-and-pop mines in that area are doing very well. And you can see that everywhere. I mean, these people are saying, yeah. I bought a new motorcycle. I put down a new floor in my house. I remodeled this or that. Maybe I'm going to buy a pickup. The money's flowing in that part of Colombia right now.
Ryan Knutson: Situations like this are playing out at coal mines all over the world. But this increase in production is at odds with many countries aims to reduce greenhouse gas emissions.
Juan Forero: Yeah. Europe has been trying, the United States and many other places have been talking about moving away from coal. And what we're seeing is the exact opposite right now. We're seeing the world turning toward coal. Let me just give you this important statistic. I spoke to the International Energy Agency. They just came out with a report that said that global coal consumption this year will match 2013, which was a record. This is from a report that just came out the other day. And they're saying that they estimate that that is going to increase next year. So let me make this point more clear. We're going to be consuming more coal next year. More coal than ever before.
Ryan Knutson: But consuming this much coal was not part of Europe's original plans, especially when it comes to climate change. That's after the break. With the world producing more coal, Europe has a better chance of getting the energy it needs to keep the lights on and homes heated through the upcoming winter. But Europe has spent the last decade trying to wean itself off of fossil fuels like coal, and transition to cleaner sources of energy. How much dirtier is coal than other types of energy?
Phred Dvorak: It's a lot dirtier than other forms of fossil fuels, even. And it's also responsible for a large portion of CO2 emissions, globally.
Ryan Knutson: Our colleague Phred Dvorak covers climate change. Why is Europe leaning into coal right now, rather than renewable energies like solar or wind?
Phred Dvorak: The short answer is Europe is trying very hard to do both. But it's in such dire energy straits that it can't help but add whatever ready energy source it can at this time. And coal is there and ready.
Ryan Knutson: Phred says that Europe still needs coal because the infrastructure simply doesn't exist yet to fully switch over to renewable energy. Building new solar and wind capacity is complex and takes time. And even if that was already in place, most European homes wouldn't be equipped to get their heat from it.
Phred Dvorak: A lot of homes are heated by natural gas, you've got a gas furnace somewhere. And if you want to switch that away from fossil fuels, away from gas to electric power, you have to install something like a heat pump. And that has to be done in every home. And that will take a lot of time.
Ryan Knutson: Still, even as the war in Ukraine has forced the European Union to embrace more fossil fuels in the short term, it's also made the continent double down on green energy in the long term.
Phred Dvorak: So that gives everyone the kick in the pants needed to roll out money, roll out investments, and make some tough lifestyle changes in order to get those things done. Which are hard things.
Ryan Knutson: The EU has now committed to installing more clean energy on a faster timeline than it was planning before the war started. Europe now wants to get 45% of its energy from renewables by 2030, and more than double its solar capacity by 2025.
Phred Dvorak: So for example, faster installation and higher goals for solar. Faster installation of heat pumps, faster installation or accelerated installation of panels on rooftops. All kinds of accelerated goals that they put in a new plan that they called REPowerEU.
Ryan Knutson: So it seems like the war in Ukraine is having this dual impact on energy and climate change in Europe. On the one hand, Europe is having to go back to this very dirty greenhouse gas producing technology in coal, in the short term. But in the longer term, it's accelerating the continent's climate goals to transition to renewable maybe more quickly than they had originally planned. So what's the net effect of that going to be on climate change?
Phred Dvorak: Hard to say. It depends. Are you a glass half-full or a glass half-empty person?
Ryan Knutson: I'm definitely a glass half ... is half. It's just half.
Phred Dvorak: Okay, well, so in the short term, it's not good for the climate. And I think there's no disagreement on that, in the short term. Keeping coal power plants running for longer is not good. So that's the glass half-empty part. Now in the longer term, some people say that this is a good chance. It's a good chance to accelerate medium to long term energy transition plans. So that's the optimistic view.
Ryan Knutson: But for this optimistic view to become a reality, Europe will need to invest a huge amount of money and political will into meeting those ambitious, renewable energy targets. And our colleague Juan says that actually pulling it off will be hard.
Juan Forero: I think it's going to be difficult for the world to meet climate targets, because we are seeing a situation where coal consumption in the world globally is now, this year, going to pretty much equal 2013, which was the high for global coal consumption. And next year, it's estimated it's going to rise even more. So that's the situation right now, at least in the next year or two. And again, coal is the dirtiest fossil fuel. And so it's going to take a while for them to shift away from this.
Ryan Knutson: That's all for today, Friday, August 5th. The Journal is a co-production of Gimlet and the Wall Street Journal. Your hosts are Kate Linebaugh and me, Ryan Knutson. The show is produced by Melvis Acosta Chrisostomou, Annie Baxter, Katherine Brewer, Pia Gadkari, Rachel Humphreys, Matt Kwong, Annie Minoff, Laura Morris, Kim Nederveen Pieterse, Afeef Nessouli, Enrique Perez de la Rosa, Sarah Platt, Aaron Randle, Alan Rodriguez Espinoza, Vladislav Sadiq, Pierce Singgih, Catherine Whelan, and Victoria Whitley-Berry. Our engineers are Griffin Tanner and Nathan Singhapok. Our theme music is by So Wiley. Additional music this week from Catherine Anderson, Peter Leonard, Bobby Lord, Nathan Singhapok, and Blue Dot Sessions. Fact checking by Nicole Pasulka. Thanks for listening. See you Monday.
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